Unit contribution margin, also known as contribution margin per unit, shows a company how profitable each unit is. Variable costs are an important part of contribution margin. Variable costs are costs that change depending on how many units you produce. For example, if you pay for electricity based on how much electricity you use, then its a variable cost. The other type of cost is a fixed cost. These costs do not change with the level of production, so if you pay a monthly set fee for electricity, it's a fixed cost.

Find the price your company sells the units for individually. For example, a company makes widgets. The company sells the widgets for $5 per unit.

Separate your variable costs for the period from your fixed costs for the period on your expense report. Add together all of your variable costs to find total variable costs. In the example, the company has $400,000 in total variable costs.

Divide your total variable costs by the number of units produced for the period. In the example, if the company produces 300,000 widgets during the period, then $400,000 divided by 300,000 units equals about $1.33 per unit variable costs.

Subtract the per unit variable cost from the sales per unit to calculate the unit contribution margin. In the example, $5 minus $1.33 equals $3.67.